UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________ to __________
Commission File No. 33-92810
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Programmer's Paradise, Inc.
-----------------------------------------------------------------
(Name of issuer in its charter)
Delaware 13-3136104
- ---------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1163 Shrewsbury Avenue, Shrewsbury, New Jersey 07702
- ---------------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number (732) 389-8950
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
There were 4,826,523 outstanding shares of Common Stock, par value $.01
per share, as of July 31, 1998.
Page 1
Exhibit index is on page 14.
PROGRAMMER'S PARADISE, INC.
Index to Form 10-Q
Page No.
--------
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997 3
Condensed Consolidated Statements of Income and Comprehensive
Income for the Six Months and Three Months Ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 7
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule 15
Page 2
PART I - FINANCIAL INFORMATION
PROGRAMMER'S PARADISE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
June 30, December 31,
1998 1997
---- ----
(Unaudited) (Audited)
Current Assets
Cash and cash equivalents $11,574 $20,571
Accounts receivable 36,102 38,517
Inventory 4,982 4,627
Prepaid expenses and other current assets 3,891 2,561
Deferred income taxes 1,737 1,619
------- -------
Total current assets 58,286 67,895
Equipment and leasehold improvements 2,092 1,862
Goodwill 13,717 14,185
Other assets 681 707
Deferred income taxes 1,459 1,719
------- -------
$76,235 $86,368
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $ 817 $ 958
Accounts payable and accrued expenses 37,547 46,979
Other current liabilities 2,695 3,881
-------- -------
Total current liabilities 41,059 51,818
Other liabilities 116 117
Notes payable - Long-term 1,913 2,220
Stockholders' equity
Common stock 49 48
Additional paid-in capital 33,381 33,633
Retained earnings (deficit) 841 (256)
Treasury stock (10) (343)
Cumulative foreign currency translation adjustment (1,114) (869)
-------- -------
Total stockholders' equity 33,147 32,213
-------- -------
$ 76,235 $86,368
======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
Page 3
PROGRAMMER'S PARADISE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share data)
Six months ended Three months ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
Net sales $ 103,973 $ 78,039 $ 50,780 $ 39,099
Cost of sales 90,953 65,934 44,274 32,897
--------- --------- --------- ---------
Gross profit 13,020 12,105 6,506 6,202
Selling, general and administrative expenses 10,603 8,656 5,673 4,473
Amortization expense 491 452 246 226
--------- --------- --------- ---------
Income from operations 1,926 2,997 587 1,503
Interest income, net 140 103 62 68
Unrealized foreign exchange loss (86) (101) (32) (23)
--------- --------- --------- ---------
Income before income taxes 1,980 2,999 617 1,548
Provision for taxes 883 1,178 279 612
--------- --------- --------- ---------
Net income $ 1,097 $ 1,821 $ 338 $ 936
========= ========= ========= =======
Net income per common share-Basic $ .23 $.38 $.07 $.20
----- ---- ---- ----
Net income per common share-Diluted $ .21 $.34 $.06 $.18
----- ---- ---- ----
Weighted average common shares outstanding-Basic 4,807 4,788 4,824 4,792
----- ----- ----- -----
Weighted average common shares outstanding-Diluted 5,308 5,281 5,322 5,314
----- ----- ----- -----
Reconciliation of Net Income to Comprehensive Income:
- -----------------------------------------------------
Net Income $ 1,097 $ 1,821 $ 338 $ 936
--------- --------- --------- --------
Other comprehensive income, net of tax:
Foreign currency translation adjustments (136) (284) (87) (108)
--------- --------- --------- --------
Comprehensive Income $ 961 $ 1,537 $ 251 $ 828
========= ========= ========= ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 4
PROGRAMMER'S PARADISE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
June 30,
--------
1998 1997
---- ----
Cash provided by (used for)
Operations:
Net income $ 1,097 $ 1,821
Adjustments for non cash charges 1,028 920
Changes in assets and liabilities (10,102) 7,344
Net cash used for operations (7,977) (4,603)
Investing:
Capital expenditures (659) (305)
Capitalized software costs 5 (28)
Acquisitions, net of cash acquired - -
------- --------
Net cash used for investing (654) (333)
------- --------
Financing:
Net proceeds from issuance of common stock 82 34
Repayments under long-term debt (311) (1,591)
Repayments under lines of credit (137) 116
------- -------
Net cash used for financing activities (366) (1,441)
-------- --------
Net change in cash (8997) (6,377)
--------
Cash at beginning of year 20,571 16,281
-------- --------
Cash at end of period $11,574 $ 9,904
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 5
PROGRAMMER'S PARADISE, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1998
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six months and three months ended June 30, 1998,
are not necessarily indicative of the results that may be expected for the
year ended December 31, 1998. For further information, refer to the
consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year-ended December 31, 1997.
2. Assets and liabilities of the foreign subsidiaries, all of which are
located in Europe, have been translated at current exchange rates, and
related revenues and expenses have been translated at average rates of
exchange in effect during the year. Resulting cumulative translation
adjustments have been recorded as a separate component of stockholders'
equity.
3. In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, Disclosures about Segments of an Enterprise and Related
Information, which is effective for years beginning after December 15,
1997. Statement 131 establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. Statement 131 is effective for
financial statements for fiscal years beginning after December 15, 1997,
and therefore the Company will adopt the new requirements retroactively in
1998. Management has not completed its review of Statement 131, but does
not anticipate that the adoption of this statement will have a significant
effect on the Company's reported segments.
Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The Company is a distributor of software, operating through three
distribution channels-cataloging, corporate reseller and wholesale operations.
Catalog operations include worldwide catalog sales, advertising and publishing.
Corporate reseller operations include ISP-USA in the United States and SA(ISP*F)
International Software Partners Gmbh ("ISP*D") in Munich, Germany, wholly owned
subsidiaries of the Company, and ISP*F International Software Partners France
SA ("ISP*F"), a majority-owned company located in Paris, France and Logicsoft
Holding BV ("Logicsoft"), a recently acquired and wholly-owned subsidiary
located in Amsterdam, the Netherlands. Wholesale operations include distribution
to dealers and large resellers through Lifeboat Distribution Inc. in the U.S.
and Lifeboat Associates Italia Srl ("Lifeboat Italy") in Milan, Italy, also
subsidiaries of the Company.
The Company was founded in 1982 as a wholesaler and reseller
of educational software. In June 1986, the Company acquired Lifeboat Associates,
a wholesale distributor and publisher of software founded in 1976. Later in
1986, Programmer's Paradise was started by the Company as a catalog marketer of
technical software. In 1988, the Company acquired Corsoft Inc.; a corporate
reseller founded in 1983, and combined it with the operations of the
Programmer's Paradise catalog and Lifeboat Associates, both of which were
involved in the marketing of technical software for microcomputers. In May 1995,
the Company changed its name from "Voyager Software Corp." to "Programmer's
Paradise Inc.". In July 1995, the Company completed an initial public offering
of its common stock. In June 1996, the Company acquired substantially all of the
assets of The Software Developer=s Company, Inc. ("SDC") including The
Programmer's Supershop catalog, its largest domestic competitor. In August 1997,
the Company formed Programmer's Paradise, Canada Inc. located in Mississauga,
Ontario, to serve the growing developer market in Canada.
The Company began European-based operations in the first
quarter of 1993, when it acquired a controlling interest in Lifeboat Italy, a
long-standing software distributor in Italy. In January and April 1994, the
Company purchased the remaining ownership interest in Lifeboat Italy. In June
1994, the Company acquired a 90% controlling interest in ISP*D, a large
software-only dealer and a leading independent supplier of Microsoft Select
licenses and other software to many large German and Austrian companies. In
January 1995, the remaining 10% interest in ISP*D was purchased by the Company.
In late 1994, the Company organized a subsidiary in the United Kingdom to engage
in catalog operations. In December 1995, the Company acquired Systematika Ltd.
("System Science"), a leading reseller of technical software in the United
Kingdom and the publisher of the popular System Science catalog. In January
1996, the Company formed ISP*F, as a full service corporate reseller of PC
software, based in Paris and majority-owned by Programmer's Paradise France
SARL. In September 1997, the Company announced that it had acquired Logicsoft,
the parent company of Logicsoft Europe BV, the predominate Large Account
Reseller in the Benelux countries. The Company is using its European-based
operations as a platform for pan-European business development, including the
distribution of local versions of its catalogs.
Page 7
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated
certain financial information derived from the Company's consolidated statement
of operations expressed as a percentage of net sales.
Six months ended Three months ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 87.5 84.5 87.2 84.1
----------- ----------- ----------- -------
Gross Profit 12.5 15.5 12.8 15.9
Selling, general and administrative expenses 10.2 11.1 11.2 11.4
Amortization expense 0.5 0.6 0.5 0.6
--------- --------- --------- -------
Income from operations 1.8 3.8 1.1 3.9
Interest income (expense), net 0.1 0.1 0.1 0.2
Unrealized foreign exchange gain (loss) (0.1) (0.1) (0.1) (0.1)
--------- --------- --------- -------
Income before income taxes 1.8 3.8 1.1 4.0
Income taxes (0.8) (1.5) (0.6) 1.6
--------- --------- --------- -------
Net income 1.0% 2.3% 0.5% 2.4%
--------- --------- --------- -------
NET SALES
Net sales of the Company represents the gross consolidated
revenue of the Company less returns. Although net sales consist primarily of
sales of software, revenue from marketing services and advertising is also
included within net sales. Net sales for the quarter ended June 30, 1998
increased by $11,681,000, or 29.9%, to $50,780,000, over the quarter ended June
30, 1997. Net sales for the six months ended June 30, 1998 increased by
$25,934,000, or 33.2%, to $103,973,000, over the same period in 1997.
The increase in net sales for the six months ended June 30,
1998 as compared to the same period in 1997 primarily reflects the growth of the
Company's corporate reseller businesses, as well as growth through acquisitions,
partially offset by reduced catalog revenues. Consolidated reseller revenues
increased by 103.2% or $32.8 million for the six months ended June 30, 1998,
primarily as a result of market share gains in both France and Germany, compared
to the same period in 1997, as well as the effect of the acquisition of
Logicsoft in September 1997. For the six months ended June 30, 1998, reseller
revenues in France and Germany increased by 43.0% and 37.7% respectively, over
1997. Excluding the acquisition of Logicsoft, consolidated reseller revenues for
the six months ended June 30, 1998 increased by 48.9% or $15.6 million. Catalog
revenues decreased 16.6% or $6.3 million for the six months ended June 30, 1998
due primarily to the impact from the Microsoft Developer Days event that
occurred in 1997, and the absence of any significant new product releases into
the market in 1998. Revenues within the distribution channel decreased 7.6% or
$0.6 million for the six months ended June 30, 1998 due primarily to the impact
of reduced revenues within Italy.
The increase in net sales for the three months ended June 30,
1998 as compared to the same period in 1997 primarily reflects the growth of the
Company's corporate reseller businesses, as well as growth through acquisitions,
partially offset by reduced catalog revenues. Consolidated reseller revenues
increased by 102.0% or $15.8 million for the three months ended June 30, 1998,
primarily as a result of market share gains in both France and Germany, compared
to the same period in 1997, as well as the effect of the acquisition of
Logicsoft in September 1997. For the three months ended June 30, 1998, reseller
revenues in France and Germany increased by 41.2% and 30.0% respectively, over
1997. Excluding the acquisition of Logicsoft, consolidated reseller revenues for
the three months ended June 30, 1998 increased by 47.8% or $7.4 million. Catalog
revenues decreased 18.9% or $3.6 million for the three months ended June 30,
1998 due primarily to the impact from the Microsoft Developer Days event that
occurred in 1997, and the absence of any significant new product releases into
the market in 1998. Revenues within the distribution channel decreased 11.2% or
$0.5 million for the three months ended June 30, 1998 due primarily to the
impact of reduced revenues within the United States and Italy.
Page 8
Geographically, approximately 66% and 68% of the revenues were
derived from the European operations for the three and six months ended June 30,
1998, respectively. Approximately 52% of the revenues were derived from the
European operations for both the three and six months ended June 30, 1997.
GROSS PROFIT
Gross profit represents the difference between net sales and
costs of sales. Cost of sales is composed primarily of amounts paid by the
Company to publishers and vendors plus catalog printing and mailing costs.
Publisher and vendor rebates are credited against cost of sales. For the
three-month and six-month periods ended June 30, 1998, gross profit as a
percentage of sales decreased by 3.1% and 3.0%, respectively, over the same
periods in 1997, reflecting a shift in the mix of sales through the Company's
distribution channels as a result of the substantial increase in lower margin
corporate resales, primarily Microsoft Select licensing sales. The acquisition
of Logicsoft was a significant factor in the overall shift of the lower margin,
revenue mix. Gross profit in absolute dollars for the three-month and six-month
periods ended June 30, 1998 increased by $304,000 and $915,000 over the previous
year, which reflects the strength of the corporate reseller business in the
quarter.
Gross margins have been affected by the mix of products sold
and the mix of distribution channels. Historically, the gross margins attained
in the catalog channel have been higher than either the corporate reseller or
distribution channels. Margins within the corporate reseller channel are also
subject to mix variations as Microsoft Select License sales typically produce
lower gross margin results. For the six-months ended June 30, 1998, catalog
operations contributed approximately 31% of revenue and approximately 46% of
gross margin dollars as compared with approximately 48% of revenue and
approximately 67% of gross margin dollars in 1997. Corporate reseller operations
contributed approximately 62% of revenue and approximately 46% of gross margin
dollars as compared with approximately 41% of revenue and approximately 23% of
gross margin dollars in 1997. The distribution channel contributed approximately
7% of revenue and approximately 8% of gross margin dollars as compared with
approximately 11% of revenue and approximately 10% of gross margin dollars in
1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses include
all corporate personnel costs (including salaries and health benefits),
depreciation and amortization, non-personnel-related marketing and
administrative costs and the provision for doubtful accounts. Depreciation and
amortization consists primarily of equipment depreciation and leasehold
improvements. SG&A expenses have decreased as a percentage of revenues to 11.2%
from 11.4% for the three months ended June 30, 1998 and 1997, respectively. For
the six-months ended June 30, 1998, SG&A expenses have decreased as a percentage
of revenues to 10.2%, down from 11.1% for the same period in 1997. The decrease
in SG&A as a percentage of revenues reflect the economies of scale associated
with the increase in revenues from the Logicsoft acquisition, as well as the
increase in revenue from the corporate reseller channel. SG&A expenses in
absolute dollars for the three-month and six-month periods ended June 30, 1998
increased by $1,200,000 and $1,947,000, respectively, when compared to the same
period in 1997. This increase reflects the costs associated with the start-up of
the Canadian operations in August 1997 and the acquisition of Logicsoft in
September 1997, as well as additional infrastructure in the form of personnel
related costs as the Company moves into the e-commerce arena.
Geographically, the North America operation of the Company
accounted for approximately 42% and 54% of total SG&A expenditures for the three
and six months ended June 30, 1998 and 1997.
Page 9
AMORTIZATION EXPENSE
Amortization expense includes the systematic write-off of
goodwill. Amortization expense for the three and six months ended June 30, 1998
increased by $20,000 and $39,000, respectively, as compared to the same period
in 1997. This increase reflects the amortization of the excess of the purchase
price over the fair value of the net assets acquired in connection with the
acquisition of Logicsoft. In connection with the acquisition of Logicsoft during
1997, the Company recognized approximately $2.4 million in goodwill, which is
being amortized over a fifteen-year period.
INTEREST INCOME AND EXPENSE
Net interest income decreased by $6,000 for the three months
June 30, 1998 as compared to the same period in 1997 which reflects the
additional interest expense associated with the financing of the acquisition of
Logicsoft B.V., acquired in September 1997. For the six months ended June 30,
1998, net interest income increased by $37,000 as compared to the same period in
1997, primarily reflecting incremental net interest income recognized in the
United States.
INCOME TAXES
Provision for income tax was $883,000 for the six months ended
June 30, 1998, compared to $1,178,000 for the same period in 1997. The reduction
in the provision for taxes reflects the decline in taxable income in the period.
As a percentage of pre-tax income, the provision reflects higher statutory rates
in Germany do to the utilization of the net operating loss carryforwards for
German income tax purposes, as well as the impact of certain subsidiary losses,
which are not being sheltered by tax benefits.
NET INCOME
Net income was $338,000 or $.06 per share on a diluted basis
with approximately 5,322,000 weighted average common shares outstanding for the
quarter ended June 30, 1998 compared to $936,000 or $.18 per share on a diluted
basis with approximately 5,314,000 weighted average common shares outstanding
for the same period of the previous year. Net income was $1,097,000 or $.21 per
share on a diluted basis with approximately 5,308,000 weighted average common
shares outstanding for the six months ended June 30, 1998 compared to $1,821,000
or $.34 per share on a diluted basis with approximately 5,281,000 weighted
average common shares outstanding for the same period of the previous year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital needs have been to fund the
working capital requirements created by its sales growth and to make
acquisitions. The Company had cash and cash equivalents of approximately $11.6
million at June 30, 1998.
Net cash used for operations was approximately $7,977,000 for
the six months ended June 30, 1998 compared with $4,569,000 of cash used for
operating activities in the same period of the previous year. For the first six
months of 1998, cash flow was primarily used for a reduction in accounts payable
(approximately $9.4 million), specifically amounts due to Microsoft by ISP*D
under the Microsoft Select License program, a decrease in other current
liabilities (approximately $1.2 million), as well as an increase in prepaid
expenses and other current assets (approximately $1.3 million), offset by a
decrease in accounts receivable (approximately $2.4 million) as well as net
earnings for the current year period (approximately $1.3 million). For 1997,
cash flow was primarily used for a decrease in accounts payable (approximately
$8.2 million), specifically amounts due to Microsoft by ISP*D under the
Microsoft Select License program as well as an increase in inventory
(approximately $0.4 million), offset by a decrease in accounts receivable
(approximately $4.5 million).
Page 10
Domestically, the Company has a secured, demand revolving line
of credit, pursuant to which the Company may borrow up to $7.5 million under a
committed line of credit with interest at either the prime rate or Euro-rate
plus 200 basis points. The new credit facility expires on June 30, 1999 and is
secured by all of the domestic assets of the Company and 65% of the outstanding
stock of the foreign subsidiaries and contains certain covenants that require
the Company to maintain a minimum level of tangible net worth and working
capital. There were no amounts outstanding under the line at June 30, 1998.
In connection with the Logicsoft acquisition, the Company
secured a five-year term loan in the US$ equivalent of approximately $3.0
million. The term loan bears interest at 6.17% and principal and interest are
payable quarterly. The loan is payable in Netherland guilders and has an
outstanding balance at June 30, 1998 of $2,501,349 (DFL 5,100,000), of which
$588,553 (DFL 1,200,000) is classified as current notes payable to banks in the
accompanying consolidated balance sheet. The term loan is secured by all of the
domestic assets of the Company and 65% of the outstanding stock of the foreign
subsidiaries
The Company maintains a secured, demand revolving line of
credit for its German subsidiary, pursuant to which it may borrow in
deutschmarks up to DM 1,500,000 (the equivalent of approximately $829,000 at
June 30, 1998), based upon its eligible accounts receivable and inventory and a
limited guarantee by the Company of up to DM 300,000 (the equivalent of
approximately $166,000 at June 30, 1998). At June 30, 1998, there were no
amounts outstanding under the line.
The Company's Italian subsidiary, Lifeboat Italy, maintains
banking arrangements with several Italian banks, pursuant to which it may borrow
in lire on an unsecured, demand basis to finance working capital requirements,
through credit and overdrafting privileges, as well as receivables-based
advances. The aggregate credit and overdrafting limits of such arrangements at
June 30, 1998 was Lit 3,200,000,000 (the equivalent of approximately $1.8
million at June 30, 1998). At June 30, 1998, there were no amounts outstanding
under these lines.
The Company's subsidiary in France, ISP*F, maintains a demand
revolving line of credit pursuant to which it may borrow up to FRF 5,000,000
(the equivalent of approximately $825,000 at June 30, 1998), and is secured by
its accounts receivable and inventory and a FRF 3,000,000 letter of credit. At
June 30, 1998, approximately FRF 1,388,000 (the equivalent of approximately
$229,000) of the line of credit was outstanding, bearing interest at 6.50%.
The Company's subsidiary in the Netherlands, Logicsoft,
maintains a demand revolving line of credit pursuant to which it may borrow in
guilders up to DFL 2,500,000 (the equivalent of approximately $1,226,000 at June
30, 1998), and is secured by its accounts receivable and inventory. At June 30,
1998, there were no amounts outstanding under the line.
IMPACT OF THE YEAR 2000
The Company presently believes that with minor modifications
to existing operating systems, the Year 2000 Issue will not pose significant
operational problems for its computer systems. The Company believes the costs
for these modifications to be minimal.
The Company is presently conducting a review of it's key
vendors to determine whether they have effective plans to address the Year 2000.
In the event that the Company's key vendors cannot provide the Company with
software products that meet Year 2000 requirements on a timely basis, or if
customers delay or forego software purchases based upon Year 2000 related
issues, the Company's operating results could be materially adversely affected.
In general, as a reseller of software products, the Company only passes through
to its customers the applicable vendors' warranties. The Company's operating
results could be materially adversely affected, however, if it were held liable
for the failure of software products resold by the Company to be Year 2000
compliant despite its disclaimer of software product warranties.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Other than statements of historical fact, this Management's
Discussion and Analysis of Financial Condition and Results of Operations as well
as the accompanying Form 10-Q contains forward looking statements that involve
certain risks and uncertainties. Such risks and uncertainties include the
continued acceptance of the Company's distribution channel by vendors and
customers, the timely availability and acceptance of new products, and
contribution of key vendor relationships and support programs.
Page 11
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders (the
"Meeting") during the fiscal quarter ended June 30, 1998.
(a) The date of the Meeting was June 16, 1998
(b) At the Meeting, the following persons were
elected as directors of the Company, each receiving the number of votes set
forth opposite their names below:
For Against Abstain
--- ------- -------
Roger Paradis 4,489,616 100,365 -
Edwin H. Morgens 4,490,416 99,565 -
Alan D. Weingarten " " -
F. Duffield Meyercord " " -
William Willett " " -
(c) At the Meeting, the Stockholders approved an
amendment to the Company's 1995 Stock Plan to authorize an additional 675,000
shares for issuance thereunder. The results of the voting was as follows:
For Against Abstain Unvoted
--- ------- ------- -------
1,649,964 814,372 12,650 2,112,995
(d) At the Meeting, the Stockholders approved an
amendment to the Company's 1995 Director Plan to authorize an additional 75,000
shares for issuance thereunder. The results of the voting was as follows:
For Against Abstain Unvoted
--- ------- ------- -------
1,843,289 623,622 10,075 2,112,995
(e) The Stockholders also ratified the selection
of Ernst & Young LLP as the independent auditors of the Company. Such
ratification was approved as follows:
For Against Abstain
--- ------- -------
4,575,756 11,900 2,325
Effective July 14, 1998, Roger Paradis resigned his position
as Chairman, President and Chief Executive Officer. His position as Chairman and
CEO was filled by William Willett who had been a member of the Board of
Directors.
ITEM 5. OTHER INFORMATION
Under SEC Rule14a-4(c)(1), if a proposal is to be submitted
for a vote at the Company's next annual meeting of stockholders and the proposal
is not submitted for inclusion in the Company's proxy statement and the proxy
card in compliance with the processes of SEC Rule 14a-8, then, if the Company
does not have notice of the proposal at least 45 days before the date on which
the Company first mailed its proxy materials for the prior year's annual meeting
(or any earlier or later date specified in any overriding advance notice
provision in the Company's certificate of incorporation or by-laws), proxies
solicited by the Company may confer discretionary authority to vote on the
proposal. Based on the foregoing, the date after which notice of such a proposal
submitted outside the processes of Rule 14a-8 will be considered untimely with
respect to the Company's annual meeting of stockholders is March 14, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule
Page 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROGRAMMER'S PARADISE, INC.
August 14, 1998 By: /s/ John P. Broderick
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Date John P. Broderick, Chief Financial Officer,
Vice President of Finance and duly
authorized officer
Page 13
EXHIBIT INDEX
Exhibit
Number Description of Exhibits Page No.
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27 Financial Data Schedule 15
Page 14